Bill Hooks Contractors for Sub Pay

If your sub or labor temp agency is shortchanging its workers, is that your problem?

It will be—at least, in California—if one legislator has his way.

A bill now under consideration in the state's General Assembly would require employers to pay wages, taxes and workers compensation for labor subcontractors if the workers' contracting agency reneges on those obligations.

Samir Story was a 39-year-old father of three when he accepted a temporary position with a subcontractor to clean a 78.5-foot-tall tank at a large paper mill. Untrained, he suffocated and died in his first day on the job. Advocates say temporary workers are vulnerable to safety and wage violations.

The bill would "require a client employer, as defined, to share with a labor contractor all legal responsibility and liability for the payment of wages, the failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings, and the failure to obtain valid workers’ compensation coverage," the measure says.

A "client employer" is any individual or entity that uses contract workers. A "labor contractor" is any individual or entity that supplies workers to perform labor or services.

“As California’s economy begins to rebound once again, we must provide protections to workers against employers in the subcontracted economy," Hernández said in announcing the bill.

"This new economy is a new tool for employers to exploit workers against abuses of wage theft and so on, while hiding behind staffing agencies."

Official photo

California Assembly Member Roger Hernández says his bill would prevent contractors from "hiding behind staffing agencies" in shortchanging day labor.

The bill will "protect those small businesses who continue to play by the rules and engage in fair competition,” Hernández said.

Who's Affected

Subcontracting applies to employment arrangements that are generally contracted out, the use of labor contractors, or temporary staffing agencies, under the measure.

While subcontracting is not new, it has become far more common in construction, manufacturing and blue-collar sectors, Hernández said. Dozens of private companies now provide temporary construction labor.

Labor leaders have complained that big companies can avoid responsibility for paying workers by subcontracting with a small firm or hiring them through a temporary agency.

"This ‘subcontracted economy’ has led employers to rely on temporary workers who face lower wages, fewer benefits and less job security, including wage theft," Hernández said.

Temp Boom

According to the National Employment Law Project, temporary staffing employment grew from 1.1 million to 2.3 million between 1990 and 2008, then grew to 2.7 million in 2013. It now has reached a record 2.8 million people, according to the public-interest news agency ProPublica.

Temporary staffing has now reached a record 2.8 million people in the United States. About 100,000 people reportedly joined those ranks in the last year alone.

“We are setting an awful precedent by not addressing this issue," said Hernández.

"Workers across California deserve better than this, unscrupulous employers are taking advantage of the very same laws that are meant to protect workers. This measure will protect not only workers, but promote traditional employment, which may provide benefits and competitive wages.”

ProPublica reported in December that temporary workers face disproportionately high rates of wage violations and on-the-job injuries. At least 10 states have laws that regulate temporary and day labor work in some way, the news agency said.

Reaction Mixed

Unions welcomed the wage-protection measure, saying it is the only way to ensure legal compliance with employer obligations.

“Current law is simply insufficient to protect workers’ rights in the shadows of the subcontracted economy,” Caitlin Vega of the California Labor Federation told ProPublica in a letter supporting the bill. “This simple rule will incentivize the use of responsible contractors, rather than a race to the bottom.”

The business community disagrees. At a hearing on the measure last month, a spokeswoman for the California Chamber of Commerce said the law would burden businesses.

“They don’t want to violate the law,” said Jennifer Barrera. “But they just don’t know what to do or how to meet those obligations as we continue to increase the mandates on them.”

Meanwhile, a lobbyist with the National Federation of Independent Business called the measure "a huge overreach.”

Not taking on responsibility for legal and financial liabilities of contracted workers is “the whole reason you subcontract out,” Ken DeVore told the Sacramento Business Journal.